ACC305: Analysis of Big W's Issues Leading to Store Closures

This report, prepared by a student as a graduate consultant, analyzes the challenges faced by Big W, a major Australian retail chain, that led to the announcement of store closures. The report examines the competitive landscape, particularly the resurgence of Kmart, and the company's poor merchandising decisions as key factors. It utilizes Porter's Five Forces model to assess the industry's competitive dynamics and the Balanced Scorecard to evaluate Big W's performance from various perspectives. The report details the company's financial performance, including declining sales and losses, and compares it to the success of Kmart. It also provides a memorandum summarizing the issues and potential solutions for the board of directors. The analysis includes a review of relevant literature and provides recommendations for potential strategies to revive Big W's position in the market. The report is a response to an assignment brief that required the selection of a newspaper article discussing management accounting problems and the formulation of recommended solutions.

Running head: MANAGEMENT ACCOUNTING 2
Management accounting 2
Name of the student
Name of the university
Student ID
Author note

Memorandum
To: The board of directors
From: John Stewart, Accountant
Subject: Issues faced by Big W that led to announcement of closures
Aim of this memo is to focus on the issues faced by Big W that led to the announcement its
closure in recent time and to highlight the reasons behind it. The memo will further provide
the possible solution that may help the entity to revive its position. As per the retail analysis,
the competitive landscape that is changing rapidly, poor decisions of merchandising and
resurgent of Kmart can be blamed for the failure of Big W.
Background
Parent company of Big W, Woolworths has decided to close 2 warehouses and 30 shops of
Big W on 1Dt April 2019. As stated by the retail analysis Geoff Dart, decline at the Big W
initiated 5-8 years back when Kmart started flourishing under Mr Guy Russo. Before that
Kmart did not have any identity and they were like in the school days of their operation. Mr
Guy Russo position Kmart as cheerful and cheap and owned their space absolutely. On the
contrary, Big W cold never developed the market positioning and could not offer things with
good quality at the affordable prices. They were unaware of who they are targeting and
eventually how to position their brand.
Plans and strategies
Major challenges for the company were – (i) they were not fast enough in responding to
threat of the category killers and hence the big businesses are performing far better (ii)
another major challenge was the direct competitor Kmart that nailed in the coffin. The leader
planned the business around quickly and got rid of categories those were not performing as
per expectation. Further the business expanded to the categories like home décor and home
furnishing where they could offer values. Closures will take place in next 3 years so that the
staffs will get some time to find better jobs.
Porter 5 forces

Threats of new entrants – retail industry in Australia faces the strong threats from the new
entrants as it is very easy for the news retail firms to enter in the market as capital required is
low. Hence, customers have options to move from Big W to any other retailer like Kmart
who offers convenience and specialty
Threats from substitutes – retails product’s substitutes are not available in any other industry.
The threats are within the industry, for instance, people can shift from big w to Kmart or
Target and hence, the forces are strong
Supplier’s bargaining power – large number of suppliers are there in the retail industry and
hence the bargaining power of the suppliers are low. Owing to large availability of the
suppliers and strong competition among them it is unlikely for them to affect retail industry
Buyer’s bargaining power – large numbers of buyers are there and hence they have strong
forces though the amount of individual purchase is small. Hence, buyers can always move to
another company from big w if someone else is offering better quality goods with affordable
prices.
Rivalry in the industry – companies under retail industry is engaged into bottleneck
competition. Wide number of the firms in the industry imposes the strong rivalry. Often these
forms are engaged in the price war.
Competitor analysis
Following to closure of petrol business by Woolworths at $ 1.8 billion, the next one may be
on the list is Big W. CEEO Brad Banducci is planning to review the options for future of its
subsidiary Big W at the closing of 2019, if its performance does not improve. While its major
competitors Kmart and Target jumped by 21% to $ 660 million during 2018, Big W lost
additional $ 110 million totalling losses to $ 275 million for last 3 years. 1st quarter sales of
Big W dropped by 5.7% and that follows the entire year loss amounting to $ 15 million.
Conversely, sales of Kmart were up by 14% over the period of last 12 months with turnover
of more than $ 5million. It increased the profit by $470 million with rapid growth. The reason
of this major difference was Big W was only focussed to the clothing business whereas
Kmart put its eggs in other baskets too like décor and home-wares and designer feel
stationary.
Balanced scorecard

Balance scorecard is an effective strategy and a management tool with the help of which the a
semi structured document is prepared that assists the managers to maintain the record of the
activities that will be executed with the help of which the effectiveness of the company can
be maintained. It has been observed that the balanced scorecard of Big W has focused on
several factors. One of the factors that has been observed has been that the company has
looked to maintain an active lifestyle for the customers as well as for the employees. The
keeps track on the expectations of the customers and what their desires are with the help of
which the company can fulfil their expectations. Economic vitality has been another aspect
that has been looked upon by the company. It has been observed that Big W maintains their
strategy in such a manner so that the economy of the country can be maintained and thereby
prosperity can be attained. Public safety has been another aspect and the company takes
actions like awareness programs and training activities with the help of which the image of
the company will increase and the profit of the organization will rise as well. Financial
analysis is undertaken by the company so that the cost and the revenue of the company can be
understood and thereby better policies can be taken with the help of which the performance
of the company can be enhanced.
Though it has been declared by Woolworths that 30 shops of Big W will be closed in next 3
years, it has not mentioned which of the stores will be closed.
Hope the above analysis will be able to provide clear thought regarding the issues faced by
Big W in recent times and the strategies for its revival.
Sincerely,
John Stewart, Accountant
Attachment: Link of the case - Finance.nine.com.au., 2019. Big W 'needs to change its image'
after announcing closures, experts say. [online] Available at:
https://finance.nine.com.au/2019/04/02/10/58/big-w-needs-to-change-its-image-say-experts-
after-announcing-closures-of-30-shops [Accessed 19 May 2019].

Bibliography
Cummins, C., 2019. Big W sale still on the cards for Woolies as it shuts 30 stores. [online]
The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/companies/woolworths-to-close-30-big-w-stores-
20190401-p519jv.html [Accessed 19 May 2019].
Finance.nine.com.au., 2019. Big W 'needs to change its image' after announcing closures,
experts say. [online] Available at: https://finance.nine.com.au/2019/04/02/10/58/big-w-needs-
to-change-its-image-say-experts-after-announcing-closures-of-30-shops [Accessed 19 May
2019].
Mitchell, V., 2018. BIG W: Latest campaign all part of becoming more relatable. [online]
Cmo.com.au. Available at: https://www.cmo.com.au/article/648221/big-w-latest-campaign-
all-part-becoming-more-relatable/ [Accessed 19 May 2019].
NewsComAu., 2016. Is Big W worth saving?. [online] Available at:
https://www.news.com.au/finance/business/retail/analysts-split-on-the-future-of-big-w/news-
story/60a1462832d4865c73ae844ed132084a [Accessed 19 May 2019].